When Paula Farrow's marriage broke down and she was offered a home in a housing co-operative, she was dubious. She says: "The only co-op I'd ever heard of was the shop, so I was worried about how it would work. But it was a brand-new house, so I went for it."

Fourteen years on, she is chair of her housing co-op, which owns and manages 36 properties on a small estate in Minster, on the Isle of Sheppey, Kent. Farrow, 43, says co-op living has transformed her life, prompting her to take a housing degree and get involved in community work.

"Our housing is run by the tenant members who live here," she explains. "We have built up our own community. We don't have any antisocial behaviour – none. We all have a real stake in our housing and take pride in the estate."

Supporters of housing co-ops claim that they offer an antidote to society's ills, promoting community spirit and true resident involvement. Yet over the years they have been marginalised, squeezed out by home ownership on one side and the big social landlords on the other. Most people know little about co-ops or the other forms of mutual housing, such as community land trusts. Even fewer get the chance to live in one, as mutual housing – mostly rented, but some owner-occupied – makes up just 0.6% of the UK's homes.

All that could be about to change. Last month, Cabinet Office minister Tessa Jowell launched a commission to investigate the possibility of applying a new John Lewis-style mutual model to the way public services, including housing, are delivered.

The Conservatives, too, are enthusiastic. Shadow housing minister Grant Shapps sees co-ops and community land trusts as "superb examples" of communities taking responsibility for themselves. He has already unveiled plans to introduce local housing trusts, whereby communities would be able to grant themselves planning permission for housing as long as there was strong local support. "I believe they can have a very big impact nationally," Shapps says. "I can see them springing up everywhere."

Wave of interest

Those involved in co-op housing hope to capitalise on the wave of interest. "It's an exciting time," says Chris Handy, chief executive of Accord Housing Group, the largest provider of new-build co-op housing in England. "You wouldn't have thought that in the run-up to an election you would have the two major parties both trying to claim mutualism. But society seems to be turning away from the individual and back towards the community."

Handy took a lead role on the commission on co-operative and mutual housing, set up last year. Its report calls for every village, town and city in the UK to have some co-op or mutual housing by 2030. "We think co-op housing should be available as a responsible alternative to other forms of housing," Handy says. "It's not just about a home; there's a much broader argument about social fabric. They really create a community in a way that you just don't get with other forms of housing."

The commission is talking to politicians and financial institutions about new ways money could be brought in to support the development of more co-op homes.

The Tenant Services Authority (TSA), which regulates all social housing in England, has launched its own inquiry to explore whether the co-op and mutual housing sector could be expanded. "There is a growing gap between those who are able to access home ownership and those who have sufficient need to allow them to access social housing," says TSA chief executive Peter Marsh. "So we are looking to explore ways of filling that gap."

Co-op housing is hugely popular, he says, with satisfaction levels markedly higher than among social tenants generally. So why hasn't the model been more widely adopted? Partly, it may be down to size: co-ops are, by their very nature, small outfits, and most public funding for housing over the last few years has been channelled through larger organisations. But, Marsh suggests, there are also cultural barriers. "Co-ops are not part of the DNA here," he says. "There are certainly things we can learn from other countries."

One of those is Sweden, where co-op housing makes up 18% of the nation's housing stock. According to Gun-Britt Martensson, former president of HSB Riksforbund, the 535,000-member union of co-ops, it works because it provides good quality housing that people are proud to live in. She says her organisation provides a whole host of community activities, creating an atmosphere of mutual trust and building self-esteem. "We live together and we have influence together," she says. "If children grow up in a good and orderly environment, they believe they are somebody and are much more able to do things in life."

Co-op activists in the UK are convinced that the time is right for that message to be heard here. Nic Bliss, chair of the Confederation of Co-operative Housing, says: "If we want a strong co-op and mutual housing sector, the political and social will needs to be there. Now may be the right time, as the other housing alternatives are cracking at the seams. The existing framework in both housing associations and local authorities is not stimulating the kind of communities and self-reliance and independence that it ought to be."

Great neighbours

As the buzz about housing co-ops grows, residents are turning into some of its most passionate advocates. Ex-marine Nathan Cutler was another person who knew ­little about co-ops before he moved into his home in Redditch, Worcestershire, six months ago, but he has become so involved that he just become chair of the co-op. "It's the only logical way to run housing," he argues. "You don't have to go through the council if you have a problem, it's cheap, and the neighbours are great. They can't be anything else when we are all meeting up every few weeks!"

Back in Minster, Farrow agrees, but adds a note of caution: "It can be hard work. You do have to take on responsibility. I am not saying it is easy – but it does work."

The report of the commission on co-­operative and mutual housing, is at tinyurl.com/y9edw7e

Information on The Future of Housing, the Guardian's one-day conference in ­London on 25 January, at